The price of a stock at the beginning of a year is $50.There is a 70 percent chance of its price rising to $55 by the end of the year and a 30 percent chance of its price falling to $45.The stock will pay an amount of $2 at the end of the year.The current yield of the security is

Question

Quizplus · Accepted Answer

The current yield of a security is calculated by dividing the annual income (interest or dividends) by the current price of the security. In this case, the stock pays $2 at the end of the year, and its current price is $50. Therefore, the current yield is ($2 / $50) * 100% = 4%.

The Price of a Stock at the Beginning of a Year